The Camp Jasper 2016 Annual Conference scheduled for June 05 – 07 at the Fairmont Jasper Lodge takes on a special significance in light of the recent wildfires and the subsequent damage to the Fort McMurray area. A heartfelt tribute must go to the first responders and the firefighting crews that worked so persistently to battle the fires and help those in the path of the flames.
The Fort McMurray experience further complicates what has already been a difficult time in many parts of Alberta. The economic downturn brought on by slumping oil prices has led to a sharp decline in government revenues and with unemployment on the rise, local real estate markets are on the verge of a pronounced price correction.
Despite these challenges, the people of Alberta are renowned for their collective resiliency and there is no question that the province will overcome these difficulties. Until then, however, the daily realities of life must go on and for those seeking a new mortgage or planning to refinance an existing one, the current economic conditions could certainly make the task more demanding.
Tightening Lending Regime
Earlier this year the federal government introduced changes to mortgage down payment rules that increased the minimum down payment to 10% from 5% for the portion of the selling price between $500,000 and one million dollars. The motive for this change was clearly an attempt to force buyers to take a larger equity stake when purchasing a new property.
In fairness, this change affects a relatively small number of buyers as it only applies to homes greater than $500,000 but it does underscore the government’s concern that buyers are over-leveraging themselves when buying new homes. This concern is shared by the banking system as well, and while the apprehensions are largely reserved for markets like Toronto and Vancouver, the down payment requirement increase applies to markets outside these two cities as well.
In the wake of eroding oil prices, Alberta’s unemployment rate has reached a 20-year high. Many displaced oil industry workers – if they are able to find work – are being forced to take lower-paying jobs, while others are relying on unemployment benefits. Given the situation, it is likely that lenders will exercise greater caution to prevent over-exposure in those areas hardest hit by the oil downturn.
Professional mortgage brokers are uniquely positioned to help borrowers navigate the loan application process and should lenders further tighten their requirements, the services provided by mortgage brokers will be even more essential. As members of Alberta’s mortgage broker community gather for their upcoming annual conference, there will be considerable discussion on the current economic climate. From these conversations, strategies will be formed to ensure the broker community is best positioned to continue to meet the needs of their clients both now, and as the economy recovers.
EVP Residential Mortgage Lending
Home Trust Company
This post is intended for informational purposes only and is not to be considered financial advice.